High Premiums Reflect Strong Global Demand For Physical Gold

Demand for physical gold remains extremely high all over the world. After the flash crash of mid-April (which statistically can only occur once in a billion years) the flight to physical gold and silver has been unseen. Premiums had risen to extreme levels. In fact, the premiums are still extremely high, reflecting the continuing high demand. Only in India and Hong Kong have premiums come down from their highs earlier this month.

In Singapore gold coins and bars sell high premiums. It reflects not enough supply to meet the demand. Reuters reports that “supply constraints” have sent premiums to “all time highs” at $7 to spot London prices. Only one week ago, the premiums stood at $5. Moreover, Reuters writes that bullion dealers are sold out of bullion and “everybody is buying and no one is selling.”

India has run out of gold coin stocks on several places. One of the reports points out that gold and jewellery shops in the city Hyderabad (with 7 million citizens) have completely run out of stock of the best-selling gold coins while others are having to ration their remaining stocks. ”Premiums in India have dropped to $5-$7 an ounce this week,” the Wall Street Journal quotes Ketan Shroff, director at Penta Gold in Mumbai. That’s half the levels seen last week as the wedding season is off its peak.

Premiums in Hong Kong ranged between $4 and $5 an ounce, off a record high of $6 last week. “The markets see these prices as the low for the next couple of weeks, so there is not much interest,” said a trader in Hong Kong. “If prices were closer to $1,300, there would be more interest.”

Meantime, in the West it is useful to look at the premiums on eBay. The following table shows the latest premiums for the most regular coins and bars.

Goldcore writes: The gold rush is expected to continue for some time, due to delays in jewellery and coin shops receiving supplies of coins from banks and bullion brokers. This is creating a delay in the entire supply chain.